Andhra HC (Pre-Telangana)
Government Of Andhra Pradesh And Ors. vs B. Koteswara Rao And Anr. on 14 July, 1993
Equivalent citations: 1993(2)ALT553, 1995 A I H C 1086, (1993) 3 CURCC 479, (1995) 1 ARBILR 405, (1993) 2 ANDH LT 553
ORDER Motilal B. Naik, J.
1. These two revision petitions arise out of common order dated 21.1.1992 made in O.P. Nos. 357 and 250 of 1991 on the file of the II Additional Judge, City Civil Court. Hyderabad.
2. In these two revision petitions, the common question of law agitated is as to the jurisdiction of the court below in entertaining application under Section 8(1)(b) of the Arbitration Act and appointing arbitrators as suggested by respondent No. 1 herein, therefore, both the revision petitions are being disposed of by common order.
3. The facts relevant for the purpose of deciding the issue in question are under :
Petitioner No. 1 is the Government of Andhra Pradesh represented by the Secretary Irrigation (Projects Wing) Department, Hyderabad, petitioner No. 2 is the Chief Engineer (Projects), Srisailam Project, Hyderabad and petitioner No. 3 is the Superintending Engineer, Srisailam Left Bank Canal. Circle No. 1, G.V. Gudem, Nalgonda district. Respondent No. 1, who is a Class-1 contractor, was entrusted with the earthwork excavation and forming embankment of Srisailam Left Bank Canal from K.M. 30/0 to 33/0 in terms of agreement dated 21.5.1985 and supplemental agreement dated 1.2.89, out of which O.P. No. 357/91 arose, and from K.M. 33/0 to 35/0 in terms of agreement dated 21.5.1984, out of which O.P. No. 215/91 arose. In terms of clause 3 of the agreements, if the value of the claim in dispute is more than Rs. 50,000/-, the competent civil court has to function as an arbitrator. In these cases, the value of works is about Rs. 48.92 lakhs and Rs. 46.12 lakhs respectively. The stipulated period for completion of works was 9 months from the date of handing over the site. The site was handed over to respondent No. 1 on 5.9.1984 and 4.9.1984. Respondent No. 1 raised some dispute on the ground that there was default on the part of petitioner No. 1 and accordingly preferred claims in his letters dated 11.2.1991 and 11.12.1990 for payment of compensation, However, the contract was terminated vide order dated 24.12.1990 of the Executive Engineer, S.L.B.C. Thereupon, in terms of agreements, respondent No. 1, at the first instance, furnished his claims to the 1 Additional Judge, City Civil Court, Hyderabad for settlement. The learned 1 Additional Judge, by order dated 10.4.1991, returned the claim statements of respondent No. 1 with a direction to proceed as per law. Thereafter, respondent No. 1 issued a notice under Section 8(1)(a) of the Arbitration Act (for short 'the Act') on 19.4.1991 to petitioner No. 3 for filling up the vacancy in place of the designated arbitrator suggesting the name of one Shri D. Srinivasulu, Chief Engineer (Retd.), Hyderabad as the sole arbitrator, and requested petitioner No. 3 to concur with the said appointment within fifteen days from the date of receipt of the notice in respect of the two claims. As petitioner No. 3 refused to concur with the appointment of Sri Srinivasulu as the sole arbitrator, respondent No. 1 filed O.P. Nos. 251 and 357 of 1991 before the II Additional Judge, City Civil Court, Hyderabad praying to appoint sole arbitrator in respect of the two claims. Petitioners contested the above two O.Ps. by filing counter-affidavits inter alia, contending that the II Additional Judge, City Civil Court. Hyderabad has no jurisdiction to adjudicate upon the OPs filed under Section 8 of the Act. By common order dated 21.9.1992 the court below allowed both the O.Ps. by appointing one Sri K. Hanumantha Rao, Chief Engineer, I & CAD (Retd.), Hyderabad as the sole arbitrator in O.P. No. 250/91 and Sri K. Mallikarjuna Rao. Chief Engineer, N.H. Division (Retd.), Hyderabad in O.P. No. 357/91 and further directed the arbitrators to pass awards within four months from the date of entering the reference by them. It is this common order dated 21.9.1992 which is questioned in these revision petitions.
4. Learned Government Pleader for Arbitration, appearing for the petitioners contended that the II Additional Judge has no jurisdiction to entertain the OPs, as the said court is not competent to decide the matter, that in terms of agreements, the competent court, which has jurisdiction, has to be requested to act as an arbitrator if the value of the claim in dispute is more than Rs. 50,000/- and that in the event that particular court negatives the request to function as an arbitrator, then an application under Section 8 of the Act could be filed before that competent court to appoint an arbitrator to adjudicate upon the dispute. It is further contended that the work entrusted to respondent No. 1 is form Guntur district and the work is to be carried out in Nalgonda district; that though respondent No. 1 has intelligently impleaded petitioners 1 and 2 as respondents 1 and 2 to the OPs, petitioner No. 3 alone is the competent person who has called for and accepted the tenders and that, therefore, the court located within Nalgonda district alone is the competent court which has territorial jurisdiction for the purpose of adjudication any dispute arising out of the proceedings. It is also contended that respondent No. 1 at the first instance had chosen to seek reference to the Additional Judge, City Civil Court, Hyderabad, who, however, returned the claim statements directing respondent No. 1 to proceed as per law, which fact itself would go to show that the courts in Hyderabad have no jurisdiction. However, it is submitted, respondent No. 1 notwithstanding the fact that the one Additional judge returned the claim statements filed OPs before the II Additional Judge seeking appointment of arbitrators and that though the petitioners took objections before the court below as the question of Jurisdiction, the court below ignorned this aspect and entertained the OPs and appointed arbitrators as mentioned (supra). Learned Government Pleader has drawn my attention to Section 20 of the Civil Procedure Code to indicate the proper forum before which the dispute could be agitated. Section 20 reads as under :
"20. Subject to the limitations aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction :
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the court is given or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action wholly or in part, arises."
5. According to the provisions of Section 20, it is contended by the learned Government Pleader, there was no cause of action wholy or in part arose at Hyderabad; that the entire cause of action arose only in Nalgonda district, as petitioner No. 3 is the concerned who has called for and accepted the tenders and agreements were also entered into between petitioner No. 3 and respondent No. 1 and the work was to be carried out only in Nalgonda district and that, therefore, courts located in Nalgonda district alone have jurisdiction.
6. Sri M. Nageswara Rao, learned counsel appearing for respondent No. 1, on the contrary, contends that nothing is specifically mentioned in the agreements as to which is the proper court of jurisdiction to entertain the claim applications and that the only contemplation in terms of agreements is that the court of competent jurisdiction will have powers to adjudicate the disputes if the value of the claim in dispute is more than Rs. 50,000/-. Petitioners 1 and 2, whose offices are located in Hyderabad, are necessary to the OPs in as much as financial approval is done by these authorities and that, therefore, the court below has jurisdiction to adjudicate upon the applications. It is further contended that the very object of the Additional Judge, City Civil Court returning the claim statements submitted at the first instance by respondent No. 1 is an indication that he had no jurisdiction and that, therefore, respondent No. 1 rightly sought indulgence of the II Additional Judge, within whose territorial jurisdiction offices of Petitioners 1 and 2 are located. Sri Nageswara Rao has drawn my attention to Section 21 CPC and contended that there was no failure of justice occasioned to the Petitioners; that though objections were taken by the petitioners as to the entertainment of applications under Section 8 of the Act at the earliest point of time, but in terms of sub-section (3) of Section 21 CPC there are few conditions which are to be examined before this court could decide the matter, that no objection as to the competence of the executing court with reference to the local limits of its jurisdiction shall be allowed by any appellate or revisional court unless such objection was taken in the executing court at the earliest possible opportunity and unless there has been a consequent failure of justice and that, therefore, no indulgence is warranted.
7. Sri M. Nageswara Rao has drawn my attention to the decisions in Kiran Singh v. Chaman Paswan ; Pathumma v. Kuntalan Kutty ; Spl. Sec, Government of Rajasthan v. Venkataramana Seshaiyer and Government of Andhra Pradesh v. United Construction Company (1990 (2) ALT 496). On the contrary, learned Government Pleader referred to the decisions in Gupta Sanitary Stores v. Union of India and M/s. Bakhtawar Singh Balkrishnan v. Union of India .
8. In Kiran Singh's case (supra), the Supreme Court objected :
"With reference to objections relating to territorial jurisdiction. Section 21 of the Civil Procedure Code enacts that no objection to the place of suing should be allowed by an appellate or revisional court, unless there was a consequent failure of justice. It is the same principle that has been adopted in Section 11 of the Suits Valuation Act with reference to pecuniary jurisdiction. The policy underlying Sections 21 and 99, C.P.C. and Section 11 of the Suits Valuation Act is the same, namely, that when a case had been tried by a court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless it had resulted in failure of justice, and the policy of the legislature has been to treat objections to jurisdiction both territorial and pecuniary as technical and not open to consideration by an appellate court, unless there has been a prejudice on the merits. The contention of the appellants, therefore, that the decree and judgment of the District Court, Monghyr, should be treated as nullity cannot be sustained under Section 11 of the Suits Valuation Act.
9. Relying on the above decision, Sri Nageswara Rao contends that no prejudice has been caused to the petitioners and, therefore, the appellate or revisional court, in ordinary circumstances, should not interfere when the decree has been passed on merits. I am afraid, the facts in the above decisions are not akin to the circumstances under which the present litigation has cropped up. In the instant case, undoubtedly the petitioners have been taking objection before the court below as to the jurisdiction. Moreover, the agreements were entered into between petitioner No. 3 and respondent No. 1 at Nalgonda and the work to be carried out in Nalgonda district and respondent No. 1 is a native of Narsaraopet in Guntur district. Looking from any angle, the cause of action for filing the applications seeking appointment of arbitrators, in my view, could arise in Nalgonda district. May be, as observed by the Supreme Court in the aforesaid decision, unless there has been a prejudice on the merits of the case, the appellate court refrain itself from interfering with the order which is passed on merits. In the instant case, in my considered view, the court below has not passed orders on merits. In terms of agreements, the proper court which has jurisdiction, i.e., Sub-Court located in Nalgonda district, ought to have been approached at the first instance to arbitrate the matter. If the court accepted the plea of the parties, there was no necessity for filing applications under Section 8 of the Act seeking appointment of arbitrators. In my opinion, there has been failure of justice which is prejudicial to the interest of the petitioners. Therefore, the above decision is of no assistance to the respondents. Insofar as the decisions in Pathumma's case (supra), Venkataramana Seshaiyer's case (supra) and United Construction Company's case (supra), they are not relevant to the facts of the case on hand, as they totally deal with different circumstances and, therefore, they are of no avail to the respondents.
10. Now let me examine the decisions relied upon by the learned Government Pleader. In Gupta Sanitory Stores v. Union of India (supra), a Full Bench of the Delhi High Court, while considering the scope of the Section 20 CPC as to the expression 'business' held :
"..... The Union of India did not carry on business when it entered into a military engineering contract for the improvement of water supply at Joshimath. It was a public service undertaken in the exercise of the sovereign power of the State."
Thus, in order to attract the expression 'business', as contemplated in Section 20 CPC, it is necessary to see whether petitioners 1 and 2 are carrying on business. Even if petitioners 1 and 2 might have approved the agreements and tenders, but that part of act could be attributable to a service undertaken in exercise of sovereign power of the State. Therefore, the principle laid down in the above case is applicable to the facts and circumstance of this case and I have no hesitation in holding that the competent court which has jurisdiction within the meaning of agreements is the court located in Nalgonda district.
11. In M/s. Bakhtawar Singh Balkrishnan v. Union of India (supra) the Supreme Court while considering the question as to institution of suit in respect of a military contract entered into in Uttar Pradesh, work executed in Uttar Pradesh and proceedings instituted in Delhi High Court for making award passed by the Arbitrator a rule of court, held that the Delhi High Court had no jurisdiction. The Supreme Court while drawing a distinction in its earlier case in Union of India v. Ladu Lal Jain , held :
"..... The Supreme Court has drawn distinction between the commercial activities of the State on the one hand and the discharge of the sovereign functions of the State on the other. The decision in that matter has been rendered in the context of business activity carried on by the Union of India namely running of the Railways and not in the context of a sovereign activity carried on by the Union of India."
12. Applying the ratio laid down in the above decision of the Supreme Court, it is to be seen whether the activity carried on by the petitioners would fall within the expression 'business' in terms of Section 20 CPC ? Admittedly, the contract was for the purpose of earthwork excavation and forming embankment of Srisailam left bank canal. This activity of the State cannot be termed as an activity amounting to 'business'. Therefore, the decision of the Supreme Court referred to above would apply to the facts and circumstances of this case. Further, the relevant record produced by the learned Government Pleader would go to show that the contract was entered into between petitioner No. 3 and respondent No. 1 in Nalgonda district. Therefore, the proper forum for redressal of grievance of respondent No. 1 could be the court in Nalgonda district in terms of agreements.
13. Considering the pros and cons in terms of Sections 20 and 21 CPC, it is relevant to note that the petitioners have been taking objections as to the territorial jurisdiction of the court right from the beginning and, therefore, the court below ought not to have entertained the applications in view of the law laid down by various High Courts including that of Supreme Court. In view of the above discussion, I hold that the order impugned cannot sustain. It is accordingly set aside. However, it is open to respondent No. 1 to move the appropriate forum for redressal of his grievance according to law.
14. The revision petitions are accordingly allowed. No order as to costs.
15. Petitions allowed.